The state of U.S. manufacturing

Sat, 2008-10-04 00:16

Yesterday I attended a MFG.com Fusion workshop. MFG.com holds these events around the country to foster physical networking between manufacturers and buyers. One company employee gave an insightful talk on U.S. manufacturing. His first telling comment, "If you have only done what you have always done, you will only get what you always get." He gave the example of when U.S. 66 used to be the main East - West corridor. Anyone traveling by car in either direction had to use that highway. The gas stations and cafes lining the side of the road figured whichever looked most outrageous would win the most business. So there were cafes shaped like giant sombreros and roadside stands that looked like huge tacos. This tactic worked fine for years. But many of these concerns refused to change, even with the advent of the Interstate highway system. They were still admirable, hard-working companies, but those that did not change died off. The same thing happened with automobiles. You used to only be able to buy a car through a Dealership. Now, prospects can use the Web to vet and find suppliers. Thus, consumers know as much as a dealership about a car, and probably know more about the dealership's competitors.

He continued by explaining what economists dubb "the neighborhood effect," the idea of reducing transportation costs by moving industry closer to suppliers and consumers. Manufacturers are now starting to look away from low-cost suppliers such as China since rebates the Chinese government used to give Chinese manufacturers were discontinued in 7/07 and 1/08. This means that Mr. Lin who made Kewpie dolls on the cheap had to raise his prices. Add to this that China now has an income tax. Also, the government told Western-owned companies in the country that they have to unionize. And there is only one union in China -- the government's! Transportation costs are taking their toll too. Big freighter ships hauling goods are starting to slow down to lower fuel costs. This means U.S. companies are getting supplies too late. The speaker says these issues make it a great time for U.S. companies to point out how it is actually more efficient and less costly to buy from them instead of overseas firms.